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Operational Auditing

Operational Auditing. Spring 2008 Professor Bill O’ Brien. Roles of Internal Auditing. Auditing or assurance System design & implementation Performance appraisals Consultations Strategic planning Merger & acquisition analysis Market appraisals Investment analysis. Control Objectives.

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Operational Auditing

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  1. Operational Auditing Spring 2008 Professor Bill O’ Brien Operational Auditing--Spring 2008

  2. Roles of Internal Auditing • Auditing or assurance • System design & implementation • Performance appraisals • Consultations • Strategic planning • Merger & acquisition analysis • Market appraisals • Investment analysis Operational Auditing--Spring 2008

  3. Control Objectives • Safeguarding of assets • Compliance • Organizational goal & obj. achievement • Reliability and integrity of info • Economical & efficient use of assets Operational Auditing--Spring 2008

  4. Risk Categories:Evidence of Risk • Inadequate information • Failure to follow policies etc. • Loss of assets • Poor use of resources • Failure to achieve goals & objs. Operational Auditing--Spring 2008

  5. Organizational Relationship • Reporting responsibility • As high as possible…the Audit Committee • Administrative responsibility • To a key interested party Operational Auditing--Spring 2008

  6. Audit Committee History • NYSE: Suggests in 1940 • AICPA: Recommends in 1967 • FCPA: Strong imperative in 1977 • Treadway: Recommends requirement in 1987 • Blue Ribbon Committee-1999 • Sarbanes-Oxley Act-2002 Operational Auditing--Spring 2008

  7. Effective Audit Committees • Independence • Skills balance • Time availability • Tough-mindedness • Clear charter • Specific duties • Maintain documentation Operational Auditing--Spring 2008

  8. Role of Audit Committes • Financial reporting • Corporate governance • Corporate control • Treadway Comm. Compliance • Requires direct communication • Audit plans • EDP concerns • Special areas of risk Operational Auditing--Spring 2008

  9. Interaction with Auditors • Evaluate I/A staff • Review audit philosophy • Review control systems • Review plan and financial impact • Multi-year coverage comparison • Provide special requests • Assure free access for I/A • Support I/A independence • Oversight for logistics and status Operational Auditing--Spring 2008

  10. Ops. Audit as a Profession • Professional attributes • Exam • Standards • Statement of responsibilities • Inst. of Internal Auditors • Professional leadership • Technical resources and training • Code of ethics Operational Auditing--Spring 2008

  11. Accounting Business Skills “The What” • Business perspective • Organizational focus • Bias for action • Communication excellence • People proficiency Operational Auditing--Spring 2008

  12. Financial Management Guidelines “The How” • Cc • KTT • MBWA • R ƒ R3 Operational Auditing--Spring 2008

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